Investment and risk allocation

There is a broad spectrum of international practice in this domain, but the most widely used is probably public investment in the fixed infrastructure and private investment in rolling stock. However fixed infrastructure investment can be funded through public / private partnerships (PPP) and delivered through mechanisms such as design / build / operate / transfer (DBOT), or a concession for terminal development and management. Conversely, public sector transport undertakings may invest in their fleets (though leasing is also commonplace).

Any private investor will seek a minimum rate of return to reflect the cost of capital involved, and will expect compensation beyond that for the risks to which the investor is exposed. In many cases the guarantees then required result in little or no transfer of effective risk, though partial-risk guarantees are sometimes possible. Where investors are genuinely exposed to risk, they are likely to require either direct control over fare collection or a lien on the revenues arising.